Inventory and Processor Supply Issues Weigh Against Holiday PC
Shipments, According to IDC

January 10, 2019 04:31 PM Eastern Standard Time

FRAMINGHAM, Mass.--(BUSINESS WIRE)--Preliminary results for the fourth quarter of 2018 (4Q18) showed
shipments of traditional PCs (desktop, notebook, and workstation)
totaled just over 68.1 million units, marking a decline of 3.7% in
year-on-year terms, according to the International Data Corporation (IDC)
Worldwide
Quarterly Personal Computing Device Tracker. The results slightly
outperformed the forecast, which called for a decline of 4.7%, but also
produced the largest year-on-year decline since the third quarter of
2016 (3Q16) and capped the full year at a nearly flat rate of -0.4%.

Heading into the quarter there was industry-wide concern over processor
shortages and rising economic tensions between the U.S. and China.
Aggressive stocking of inventory during the previous quarter (3Q18) in
anticipation of the shortage led to some sell-through challenges,
driving a reduction of Q4 shipments in some regions. The fourth quarter
is typically oriented toward consumer promotions that help drive the
industry's biggest quarter of the year, but the confluence of events in
2018 led to the lowest sequential growth for a holiday quarter since the
fourth quarter of 2012.

Nonetheless, the market performed better than expected, with corporate
PC refresh – driven by the looming Windows 7 end of life (EOL) in
January 2020 – helping to offset consumer market challenges. Japan had
an especially strong quarter driven by commercial refresh, which lifted
virtually all aspects of the market. All regions except the U.S.
exceeded the forecast, although Asia/Pacific (excluding Japan) faced
challenges from a difficult Chinese commercial environment.

"The ongoing economic tensions between China and the United States
continue to create a lot of uncertainty in the business environment in
China. As demand for Chinese products in the U.S. drops, this
particularly impacts businesses of all sizes from the manufacturing
sector in China, which, in turn, translates to a drop in IT purchases by
these companies," said Maciek
Gornicki, research manager with IDC's Asia/Pacific Client Devices
Group. "As a result, the PC market in China is expected to suffer bigger
declines throughout the year. And if the trade war escalates further, we
should expect spillover of the impact to other countries, particularly
due to the expected fluctuations of the exchange rates impacting
businesses across the region."

"As the U.S. PC market, especially the lower-end, continued to suffer
from the ongoing shortfall of Intel CPUs, overall PC sales took a hit
during the fourth quarter of 2018," said Neha
Mahajan, senior research analyst with IDC’s Devices and Displays
Group. "While the processor supply challenges are expected to continue
into the first two quarters of 2019, PC makers are likely to see the
situation improve before the back-to-school season begins during the
latter half of the year."

Regional Highlights

USA: The traditional PC market in the U.S. saw a modest uptick in
volume from the year prior. Total shipments for the quarter reached 16.7
million units, which was slightly below forecast. Commercial shipments
remained fairly robust during the quarter, thanks to the ongoing Windows
10 refresh cycle. While market leader HP saw its year-over-year volumes
modestly decline (despite a quarter-over-quarter improvement), the other
top five vendors mostly saw volumes improve.

Europe, Middle East and Africa (EMEA): The traditional PC market
was negative in 4Q18 for the first time in six quarters with both
desktop and notebooks reporting a moderate decline. This weakening of
the market stemmed from the ongoing component shortages and was further
impacted by a level of disruption and uncertainty arising from
challenging geopolitical and economic scenarios within major economies
in the region.

Asia/Pacific (excluding Japan) (APeJ): The traditional PC market
in APeJ posted a single-digit decline in 4Q18, which was relatively
close to IDC's forecast. Overstock in the channels, coupled with Intel
CPU shortages, impacted sell-in across the region. In India, a
significant drop in consumer demand together with high inventory
remaining in the channels led to a stronger than expected decline in the
consumer and SMB segments, while Intel supply shortages led to a drop in
sales to the enterprise customers. In China, the commercial PC market
came in below expectations, impacted by Intel CPU shortages and slowness
in spending from the public sector, while U.S.-China trade issues had a
negative effect on demand from the private sector.

Japan: Corporate Windows 10 refresh entered its final phase and
helped to beat expectations for 4Q18, with growth among virtually all
OEMs, although multinational OEMs reaped most of the benefits.

Company Highlights

Lenovo maintained its status as the top OEM in the traditional PC
space, and one of only two top 5 companies to post growth in the quarter
compared to a year ago. Its US operation continued to recover from a
year ago. In APeJ, Lenovo felt increased pressure from HP and Dell, and
posted the largest decline within the region among the three vendors.

HP Inc. declined 3.2% worldwide mostly due to a challenging
quarter in the Americas. The company fell below market growth in the
U.S. where unfavorable comparisons arose due to strong results in 4Q17.
At the same time the company weathered the APeJ market slide better than
many of its rivals and tied with Lenovo in global market share in the
region for all of 2018.

Dell Inc. had the strongest year-on-year growth among the top
OEMs at 1.6% for the quarter and ended 2018 growing 5.6% over 2017, also
the strongest among the top OEMs.

Apple remained in the fourth position with market share of 7.2%
and year-on-year growth of -3.8%. Both desktop and notebook shipments
saw year-on-year declines in 4Q18.

Acer Group took fifth place with market share of 6.7% and a
year-on-year decline of 8.5%. Acer continues to compete in the gaming
space, which remains a big focus for the company in 2019, but challenges
within the component constraints likely affected its overall consumer
business in 4Q18.

In addition to the table above, a graphic illustrating worldwide market
share (based on shipments) for the top 5 Traditional PC companies over
the previous five quarters is available by viewing this
press release on IDC.com.

* Due to the Joint Venture between Lenovo and Fujitsu, which took effect
in 2Q18, data for Lenovo in the top line includes Fujitsu volume for
both 4Q18 (16.8 million units) and 4Q17 (16.5 million units). The same
logic applies to the table for Calendar Year 2018.

** For year-on-year comparison, an extra line has been added below the
table to show what Lenovo's growth would have looked like excluding
Fujitsu volume through to 1Q18.

Some IDC estimates prior to financial earnings reports. Data for all
companies are reported for calendar periods.

Shipments include shipments to distribution channels or end users. OEM
sales are counted under the company/brand under which they are sold.

Traditional PCs include Desktops, Notebooks, and Workstations and do
not include Tablets or x86 Servers. Detachable Tablets and Slate
Tablets are part of the Personal Computing Device Tracker but are not
addressed in this press release.

For more information, or to subscribe to the research, please contact
Kathy Nagamine at 650-350-6423 or knagamine@idc.com.

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